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12 August 2014
Foreign investment in insurance companies has traditionally been restricted to 49% of capital stock, except where affiliates of foreign financial entities operate in a country with which Mexico has entered into a free trade agreement that specifically addresses participation in financial entities.
While Mexico's network of free trade agreements is possibly the largest in the world, the limitation on foreign investment has nonetheless been a significant deterrent to investment in insurance companies. The specific rules that previously had to be followed to access the benefits of free trade agreements in order to establish a wholly owned insurance company were generally burdensome.
However, the Foreign Investment Law 1993 was amended earlier this year to eliminate the restrictions on participation in insurance and surety companies. Consequently, foreign investors can now invest up to 100% in Mexican insurance and surety companies, regardless of the investment's country of origin.
One exception is participation through affiliated companies of foreign financial entities, which must comply with certain requirements, including the following:
Other laws have been amended to facilitate the effective elimination of the previous restrictions, such as provisions requiring that control of the companies remain with Mexican nationals.
Investors wishing to gain control of an insurance company – whether by acquiring an existing insurer or creating a new company – will still need to comply with several regulatory requirements in order to ensure that the entities have sufficient capital and management experience to perform properly in the Mexican market.
For further information on this topic please contact Carlos Ramos Miranda at Hogan Lovells BSTL SC by telephone (+52 55 5091 0000), fax (+52 55 5091 0123) or email (email@example.com). The Hogan Lovells BSTL SC website can be accessed at www.hoganlovells.com.
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